FPIs dump FMCG, Financial Services in second half of December; IT sees inflows

Mumbai: Fast-moving consumer goods (FMCG) and financial services bore the maximum brunt of the foreign selling in the last half of December as these investors pulled out ₹16,848 crore across 15 sectors during the period. FMCG continued to witness selloff by overseas investors, who offloaded shares worth ₹4,425 crore after selling ₹1,419 crore in the first half of the month. These investors dumped shares worth ₹30,942 crore in the sector between January and November.

"The FMCG sector does not appear to be within the buying range for global investors, as it is not expected to deliver high growth and valuations remain elevated," said Pankaj Pandey, head of retail research at ICICI Direct.

Financial services witnessed foreign selling worth ₹4,009 crore in the second half of December, taking the foreign outflows in the sector to over ₹10,000 crore in the month.

Pandey noted that the weight of the top three banking stocks has been capped, and foreign selling could be related to these stocks.

"Foreign investors do not appear bearish on financials and banks; however, the selling could be a reaction to margin recovery being pushed to the next quarter following the RBI's interest rate cut in December," he said. UR Bhat, co-founder and director, Alphaniti said most global investors hold major stakes in private banks and the selling could signal a shift of funds from private banks to PSU banks.

Foreign investors withdrew funds worth ₹2,656 crore from the automobile sector in the second half of December. Bhat said that automobiles have performed well, and the foreign selling in the sector could be investors booking profits.

"Many component manufacturers in the automotive sector are dependent on China, and the haze on Chinese imports is likely to have led to profit-booking, as the good news within the sector is already in the price," said Bhat.

In the first half of the month, foreign investors had dumped shares worth ₹23,561 crore across 18 sectors. After consistent outflows, the information technology sector received the highest foreign inflows worth ₹4,457 crore in the latter half of December, making it the first fortnight of inflows after June. Overseas investors withdrew almost ₹76,000 from the sector between January and November.

Pandey added that globally, investor comfort with AI stocks is waning, and Indian IT companies offer a contrarian opportunity.

"While there is limited scope for earnings recovery in the near term, IT stocks are trading at valuations close to five-year lows, which may have attracted foreign investors," he said. Foreign investors purchased shares to the tune of ₹12,055 crore across 9 sectors in the second half of December.